In a period of general economic decline; typically defined as a decline in GDP for two or more consecutive quarters one of the mechanism which is used to combat it is quantitative easing.Others are monetary and fiscal policie ... read full comment
In a period of general economic decline; typically defined as a decline in GDP for two or more consecutive quarters one of the mechanism which is used to combat it is quantitative easing.Others are monetary and fiscal policies.
Expansionary monetary policy is basically just lending more money to people, people borrow that money and spend it creating demand in the process.Fiscal policy is spending money through the government mostly through the manipulation of interest rate thus creating demand in the economy.Other measures taken include tax cuts and infrastructure spending.The idea is to inject liquidity in the system and thus stimulate economic activity.
The so called Keynesian approach or QE takes several forms but all of them are supposed to result in the so called "multiplier effect" causing the economy to grow once it has been stimulated by making more money available at some place in the social system.
These are measures which are both capital and labour intensive which requires a great deal of input.The banks the state must work hand in hand to generate the required capital needed to stimulate economic activities and that means the weight of your national reserves,your industrial output and exports.Most African governments are running on deficit and would be unable to inject the necessary liquidity that could be effective in a QE or any of the monetary policies.The African economy is too dependant and is at the mercy of the donor countries to be effective.
Obenfo 9 years ago
Oketekyie,
African economies are too dependant. When you scan through the world economy, more than 90% of the countries have debt on their balance sheets just like any other economy in African countries, but Africa's over ... read full comment
Oketekyie,
African economies are too dependant. When you scan through the world economy, more than 90% of the countries have debt on their balance sheets just like any other economy in African countries, but Africa's over-dependence on Donors, is part of the Continent's desperate and vulnerable condition.
Kojo T 9 years ago
This is a must read for Dr bawumia. African economies are to import dependent and export only raw materials .Africa needs capital private or state to PRODUCE .We cannot go on the QE Great article
This is a must read for Dr bawumia. African economies are to import dependent and export only raw materials .Africa needs capital private or state to PRODUCE .We cannot go on the QE Great article
Gye Nyame 9 years ago
Good article, but I don’t believe our problems in Ghana are related to the recession in the US , our problems started way before 2008, sure once there was a downturn of the economy in the US there was a ripple effect on som ... read full comment
Good article, but I don’t believe our problems in Ghana are related to the recession in the US , our problems started way before 2008, sure once there was a downturn of the economy in the US there was a ripple effect on some countries – for instance in the case of Ghana a reduction of funds from donor countries etc.
Agree that QE requires plenty of $$$, policies, certain economic structure, ideology, infrastructure and discipline which works in a country like the US, so it is not the silver bullet. It is definitely not a model for Ghana to follow. Countries you mentioned that are struggling in Europe (Portugal, Italy, Greece, Spain) are suffering due to weak economies prior to joining EU, and converting their currencies to Euros which put them over the cliff due to the strength of the Euros, as compared to say the lira. The strength of the Euros killed their factories and economy. Some of the same reasons why China does the currency manipulation to keep the Yuan low. I think the Euros correcting itself lately might be a blessing for some of the mentioned countries in Europe.
Ghana’s problems are hydra headed and self-made – it is has been a combination of bad leadership, economic mismanagement, bigger government, lack of planning, insufficient infrastructure, confusing economic ideology, corruption, urbanization, indiscipline, unskilled labor and a bad education system etc. This is all a recipe for disaster.
I blame all of our leaders since independence but the one who gets the most blame is Rawlings who had a good 19 years or so, and saw the most population growth and urbanization but did little to support the growth then, and plan for the future. In addition JJ dumbed down education with the JSS/SSS system which the system was not ready for due to lack of the necessary tools, facilities and curriculum to make it effective. A country without education suffers and that is why we are seeing many unemployable youth with no creativity although they have many credentials on paper. You know, the chickens have come home to roost.
Many investors have visited Ghana but have left for other countries like India due to infrastructure problems, ADB settled for Tunisia during the Ivory Coast crises due to logistics and the same infrastructure problems, in Ghana although they consulted with Ghana first, a preferred location, due to proximity to Ivory Coast, before trekking off to Tunisia. Until “dumsor” is settled we are going to see more companies exiting Ghana and job losses which would further exacerbate the economy.
My fear is things would get worse before it gets better; there is so much to fix to make our economy viable and also doubt that the current administration is up to task from what we have seen so far. I am also not convinced yet that any of the opposition parties has the strategy to revamp the economy but again 2016 is far away and who knows what will happen.
Prof Lungu 9 years ago
Gye Nyame,
We agree with everything you've said, particularly with respect to the failure of Rawlings over those 19 years. With respect to education, the JSS/SSS system was the dumbest idea, given lack of planning and resour ... read full comment
Gye Nyame,
We agree with everything you've said, particularly with respect to the failure of Rawlings over those 19 years. With respect to education, the JSS/SSS system was the dumbest idea, given lack of planning and resources.
Dumsor is an acute problem!
In this age, it is the jokester of a politician who will attempt to develop a town, even a village, without the benefit of utilities (electricity, water, sewer, roads); and an educated and technologically-savvy populace.
All that said, we will remove "urbanization" out of our "...recipe (of)...disaster(s).
We are thinking, it is the failure from the other "recipe" items that influence the nature and extent of urbanization - that is responsible for the push-pull, from rural to urban!
Urbanization is a global phenomenon that must be properly managed to reap benefits associated with mass densities, economies of scale, through associated agglomeration of economic activities in specific locations.
In Ghana, urbanization has/is poorly managed - unmanaged, even.
Imagine constructing an entire "Freeway in the center of Accra and failing to provide pedestrian overpasses at the proper locations, within the same plan.
Or constructing a stadium complex right under the major airport's Airspace environs, in the biggest urban area.
Or proposing to build a Bullet Train from Accra to Kumasi, when the major artery (highway) that connects more than 90% of the people in the country is wallowing in dusk, dirt, mud, and umanaged fecal excrement from road site to road intersection, uncompleted, in more than a decade.
So, it is precisely for those reasons the Nkrumah-CPP plans had Urbanization and Rural Development components plans.
As a consequence, sadly, for the last 40 years plus, it is difficult to see what governments' plans have been in those areas, or how they have been resourced to provide some semblance of balance in Urban-Rural development.
All we need to do is take a look at the sorry Accra-Kumasi-Tamale-Bolgatanga-Navrongo spans of the Ghana pseudo-highway network.
Thanks.
Prof Lungu 9 years ago
Mr. Seth Sintim-Agyeman,
We are glad this essay is making a second round as there appeared to be some type of "Error" that prohibited comments the first round.
And congratulations on earning your MBA and CPA. We know tha ... read full comment
Mr. Seth Sintim-Agyeman,
We are glad this essay is making a second round as there appeared to be some type of "Error" that prohibited comments the first round.
And congratulations on earning your MBA and CPA. We know that Ghana could use a lot of people of your caliber in managing acquisitions and reviewing contracts to ensure they are in the public interest, beyond value-for-money.
We are not experts in this area, or even knowledgeable. What we write below is what we might expect to read from Paul Krugman or Thomas Piketty, with respect to central banks in this age, and your essay.
Our sense is, if a country does not create conditions that require QE, then it will not be necessary to apply QE, I, II, or III, etc. That is not the same as when a central economic planning (central bank) attempts to stimulate the economy to keep unemployment low and inflation under control.
In effect, while QE was not necessary in Germany or China, QE was implemented in the US to incentivize banks to increase lending to businesses and individuals to spur investment and employment. In this US, even when banks were now borrowing at 0%, from a high 15%+, they still would not lend, and instead spent to free money mostly to buy back their own shares.
To cut to the chase, the US, in our example, needed QE easing because a financial and management class run the economy aground by selling worthless stocks (credit default swaps) to the government (Freedie Mac, Fannie Mae, et.), after they had taken out all the profits and capital in the underlying housing stocks.
Credit default swaps do not produce or cause the manufacture of tangible goods/products, yet, they came to be protected by the government.
YOUR: "...Banks in most 3rd World economies transact business in “savings and loans,” without any sophisticated financial derivatives transactions or any dynamic repurchase (Repo) or reverse repurchase (Reverse-Repo) activities... 3rd World economies are not yet ready to imitate the United States, the United Kingdom, and other advanced economies in the implementation of quantitative easing..."
OUR COMMENT: That is just as well. Maybe those countries do not need a new class of economic parasites with access to government resources totally out of all proportion to their value to their economies.
However, if "QE is gradually taking shape as a viable financial policy tool" to spur employment, education, housing and investments in transportation and public health, etc., though normal baking activities (saving and loans - leveraged by new, but tested technologies), in those "3rd World economies", we would hazard that those countries would probably be on the right track. That, we will humbly submit, is what promotes not just "economic freedom", but also a narrowing of the gap between the super-rich and the poor, and as a result, mitigation and avoidance of "social uprising".
Can't wait to read your up-coming essay.
Thanks, Mr. Seth Sintim-Agyeman, MBA, CPA.
Kojo T 9 years ago
Your explanation is spot on These are the kind of contributions we need as a nation to grow , not the emotive types that some shallow minded people put out Thanks again Prof and Mr Sintim Agyeman
Your explanation is spot on These are the kind of contributions we need as a nation to grow , not the emotive types that some shallow minded people put out Thanks again Prof and Mr Sintim Agyeman
Kofi 9 years ago
It is so sad that 3rd World economies, especially African economies find it so difficult to stand on their own feet. Immediately after the 2008 global financial crisis, Africa seemed to be the best place anyone would want to ... read full comment
It is so sad that 3rd World economies, especially African economies find it so difficult to stand on their own feet. Immediately after the 2008 global financial crisis, Africa seemed to be the best place anyone would want to be, and African banks seemed to be the only sound financial institutions around the globe.
Africa was considered too poor, so Africa was skipped when toxic financial assets were being spread around the globe; but all of a sudden, Africa is now suffering more than anybody else, oh Africa!
Yes, Africa doesn't need to imitate any economic policy nor any sophisticated economic system, just as Mr. Sintim said, neither does Africa needs Western or Eastern loans. Africa needs her sons and daughters to clear their minds and think for Africa, and, to love their own.
United Ghana 9 years ago
Good analysis. 3rd world countries suffer from low production capacity & human capability(agricultural & industrial) so QE would only lead to adverse B.O.P. & inflation. Look what happened when Acheampong printed money
Good analysis. 3rd world countries suffer from low production capacity & human capability(agricultural & industrial) so QE would only lead to adverse B.O.P. & inflation. Look what happened when Acheampong printed money
ghanaman 9 years ago
The author has done a good job of presenting an innovative economic practice that could be exploited by 3rd World economies. However, as he briefly points out, other strategic and innovative policies exist as well. The proble ... read full comment
The author has done a good job of presenting an innovative economic practice that could be exploited by 3rd World economies. However, as he briefly points out, other strategic and innovative policies exist as well. The problem with economies such as ours is that even researchers shun doing tedious work -read "rigorous thinking"- preferring to join politicians in the pursuit of systems that penable them (politicians and economists) plunder the wealth of their nations but do not "efficiently track individual and corporate revenues, so governments are already losing billions of dollars to multinational corporations." One can only look forward to the sequel. Good job. Write, brother write! And write more and more!!!!
In a period of general economic decline; typically defined as a decline in GDP for two or more consecutive quarters one of the mechanism which is used to combat it is quantitative easing.Others are monetary and fiscal policie ...
read full comment
Oketekyie,
African economies are too dependant. When you scan through the world economy, more than 90% of the countries have debt on their balance sheets just like any other economy in African countries, but Africa's over ...
read full comment
This is a must read for Dr bawumia. African economies are to import dependent and export only raw materials .Africa needs capital private or state to PRODUCE .We cannot go on the QE Great article
Good article, but I don’t believe our problems in Ghana are related to the recession in the US , our problems started way before 2008, sure once there was a downturn of the economy in the US there was a ripple effect on som ...
read full comment
Gye Nyame,
We agree with everything you've said, particularly with respect to the failure of Rawlings over those 19 years. With respect to education, the JSS/SSS system was the dumbest idea, given lack of planning and resour ...
read full comment
Mr. Seth Sintim-Agyeman,
We are glad this essay is making a second round as there appeared to be some type of "Error" that prohibited comments the first round.
And congratulations on earning your MBA and CPA. We know tha ...
read full comment
Your explanation is spot on These are the kind of contributions we need as a nation to grow , not the emotive types that some shallow minded people put out Thanks again Prof and Mr Sintim Agyeman
It is so sad that 3rd World economies, especially African economies find it so difficult to stand on their own feet. Immediately after the 2008 global financial crisis, Africa seemed to be the best place anyone would want to ...
read full comment
Good analysis. 3rd world countries suffer from low production capacity & human capability(agricultural & industrial) so QE would only lead to adverse B.O.P. & inflation. Look what happened when Acheampong printed money
The author has done a good job of presenting an innovative economic practice that could be exploited by 3rd World economies. However, as he briefly points out, other strategic and innovative policies exist as well. The proble ...
read full comment